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Running head: MACROECONOMICS AND MICROECONOMICS 1 The Role of Macroeconomics and Microeconomics in XYZ’s Success Northcentral University Comprehensive Strategic Knowledge Studies SKS7001-8 Dr. Jaime Klein February 14, 2016
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Introduction: Macroeconomics and microeconomics are both significantly important economical factors which should be examined and incorporated when drafting the blueprint for a company’s success. Microeconomics is the branch of economics that deals with human behavior and choices as they relate to relatively small units such as an individual, a firm, an industry or a single market ( Foundations of Microeconomics.(n.d.). Macroeconomics, on the other hand, is the branch of economics that deals with the entire economy at large. Both of these economic branches combined weigh heavily in importance when trying to achieve corporate success as microeconomics deals with key players that are seen time and time again such as consumers, business firms and factor owners and macroeconomics engage in critical conversations regarding macroeconomic problems, policies, theories and views of how the economy functions ( Foundations of Microeconomics.(n.d.). As XYZ is expanding internationally and is also in the process of revamping its information technology and human resources departments, both macroeconomic and microeconomic reviews will be conducted and will play a vital role in the growing success of XYZ Company. Elasticity: The general concept of elasticity provides a technique used for estimating the response of one variable to changes in another variable. The price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in price ( Foundations of Microeconomics.(n.d.). Last year, XYZ has raised the cost of all women’s jewelry sold in their accessories departments by 20%. As a result, however, the quantity demand for XYZ’s jewelry has fallen by 40%. Therefore, the coefficient of price elasticity of demand (the percentage change in quantity demanded divided by the percentage change in price, 40 divided by 20) is 2, which means that the percentage in quantity demanded will be two times any percentage changed in price. In an
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effort to increase the demand for jewelry and increase the sales of the accessories department as a whole, XYZ will be reducing its cost of jewelry by 10% in 2016. Consumer Choice: The diamond-water paradox, also known as the paradox of value, uses the cost of diamonds verses the cost of water as an example to show that necessities often cost far less than the cost of luxuries as water is inexpensive and diamonds are expensive ( Foundations of Microeconomics.(n.d.). The total satisfaction that a consumer receives from an item they have purchased is known as total utility. Utils, a fictional measurement denomination can be used to measure the amount of usefulness a consumer can receive from an item they have purchased ( Foundations of Microeconomics.(n.d.). For example, purchasing snow boots from XYZ may get 15 utils as they were used during the first snow fall of the year. When a second pair of snow
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